S&P Global Ratings lowered its ratings on propane distributor Ferrellgas Partners LP due to refinancing risks stemming from $1.86 billion worth of senior debt set to mature between 2020 and 2023.
The rating agency moved its issuer credit rating on the partnership down a notch to CCC from B-, as S&P believes that Ferrellgas' current capital structure is unsustainable. S&P also lowered its rating on the partnership's structurally subordinated senior unsecured debt to CC from CCC and gave it a negative rating outlook.
Ferrellgas' debt profile includes $357 million of subordinated notes that are scheduled to mature in 2020, and $1.5 billion of senior notes that are due each year from 2021 to 2023. The upcoming maturities of the notes, coupled with the partnership's inability to pay distributions related to the notes, led S&P to believe that the partnership could end up restructuring its debt in the next 12 months, according to a Nov. 9 news release.
"Ferrellgas' financial risk profile is highly leveraged, reflecting forecast debt to EBITDA of 8.6x in 2019," according to S&P. "We expect this ratio to be 8.1x-8.6x during the next three years."
Along with the possible debt restructuring, S&P attributed its negative outlook on Ferrellgas to its expectation that the partnership may not be able to repay maturing debt due to insufficient liquidity in the next one to two years.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found in the Sources section.